Relief for homeowners at last after the National Australia Bank broke rank with its competitors and pledged to pass on any interest rate cuts to customers. It is considered a small victory to the Treasurer.

Transcript

LEIGH SALES, PRESENTER: There may be a bit of relief for hard-pressed homeowners on the way after National Australia Bank buckled under pressure and broke ranks with its commercial bank competitors.

But here's the fine print - NAB's promise only extends to a quarter of a percentage point drop.

Still, the decision puts pressure on the other big banks to follow suit, though none have been willing to commit, so far.

From Canberra Dana Robertson reports.

DANA ROBERTSON, REPORTER: It hasn't even happened yet but already one bank is gloating.

AHMED FAHOUR, NAB CHIEF EXECUTIVE: NAB will be pleased to announce a interest rate cut along the lines of the Reserve Bank if they were to do so in September.

DANA ROBERTSON: The Reserve Bank has been widely tipped to cut rates at its next meeting. But the commercial banks have been hedging their bets about whether they'd pass it on to customers. The NAB is now declaring it will.

AHMED FAHOUR: There's no question it's on the top of a lot of people's minds as to when they can get some relief and the Reserve Bank, I feel, is sending a signal out there that it's intending on doing so, and nothing gives me greater pleasure for us to follow suit.

DANA ROBERTSON: It's music to the ears of the Treasurer.

WAYNE SWAN, TREASURER: This decision by the NAB now throws down the challenge to all the other banks, other banks should have a good hard look at themselves.

DANA ROBERTSON: But so far none of the other big banks have committed to follow suit. The nation's biggest home lender says it'll "do its best to pass on as much as it can" to customers.

Westpac would "love to pass on any rate cuts... but will consider financial factors at the time".

The ANZ would move "if lower short term funding costs can be sustained."

And St George says "there are many other variables besides the official cash rate that affect interest rates."

WAYNE SWAN: They have passed on rate rises in a nanosecond, and they have a responsibility to pass on rate cuts when they come through the system.

BRENDAN NELSON, OPPOSITION LEADER: I would like to see Wayne Swan actually fronting the banks, eyeballing the banks and the chief executives in a very serious and a very public way to make sure they pass it on.

DANA ROBERTSON: But for all the praise it's receiving, even the NAB has a get out of jail free card stashed up its sleeve. It's only guaranteeing to pass on a quarter of a percentage point drop, all bets are off if they goes further.

AHMED FAHOUR: If on the off chance that they do 50 basis points we'll see how the market reacts.

DANA ROBERTSON: If and when the Reserve Bank does cut interest rates, Wayne Swan will be under intense political pressure to make sure they are passed on.

And today his old sparring partner weighed into the battle, Peter Costello again pointed out that the banks didn't increase their rate margins during his tenure as treasurer.

Peter Costello was guest of honour at the opening of his friend Helen Kroger's senate office in Melbourne.

After months of silence-

PETER COSTELLO, FORMER TREASURER: Have a good day.

DANA ROBERTSON: The former treasurer finally talked about his future. But his answers left things as confused as ever. When asked if he'd challenge for the leadership Mr Peter Costello said "I am not... Everybody knows that."

But it's what he didn't say that matters. Peter Costello wasn't asked whether he'd accept the leadership if drafted by his colleagues, or if he plans to retire.

BRENDAN NELSON: We've had a chat about his future and what we are doing, and he'll announce that when he's ready to do so. It won't be long.